In a surprising development, President Marcelo today vetoed the “More Housing” package, which includes significant changes to Portugal’s popular Golden Visa program. This move will send the law back to Parliament, which is set to commence a new session in early September after the holidays.
Despite the veto, the ruling Socialist Party (PS), which holds an absolute majority, has the power to reconfirm the law in the subsequent vote. If this occurs, the President will be obligated to promulgate the law within 8 days. At this time, it remains uncertain whether the PS will introduce amendments to the law due to the veto. However, it is anticipated that there will be no meaningful modifications concerning the Golden Visa.
Impact on Golden Visa investors
The Golden Visa program, which has been a significant draw for international investors for more than a decade, is expected to undergo its biggest changes ever. Real estate investments will no longer be allowed, but the much more expensive €500,000 fund investment and €250,000 cultural donation options will still be allowed. These alterations will now be delayed, possibly until late September or October.
For investors who have yet to submit their Golden Visa applications, this veto effectively offers a brief window of opportunity. If you have been on the fence about investing, now is the time to execute. You’ll have at least a month, possibly longer, to finalize everything and get your application in.
The President’s full statement
The President didn’t touch specifically on the Golden Visa program in his critique of the proposed law. Still, his open letter to prime minister Antonio Costa is an interesting read:
To His Excellency The President of the Assembly of the Republic,
I address you under the terms of Article 136(1) of the Constitution, transmitting this message to the Assembly of the Republic on Decree No. 81/XV, which approves measures in the field of housing, making various legislative changes, in the following terms:
1. The emergence of the housing crisis, which especially affects young people and the most vulnerable families, but is beginning to affect the middle classes, as well as the need to increase the supply of housing, led the government, six months ago, to announce an ambitious Mais Habitação (More Housing) Program, right after recreating a Ministry for Housing.
This program included significant administrative simplification measures, which were included in another Assembly of the Republic law that I have just promulgated.
But above all, in the eyes of the Portuguese, it was centered on five very strong ideas:
1 - The forced rental of vacant private homes, increasing the supply of housing;
2 - Limiting local accommodation, thereby also allowing an increase in the supply of affordable rentals;
3 - Strengthening the role of the state in offering more homes, by itself and in collaboration with cooperatives, extending the aforementioned affordable rent;
4 - The provision of public incentives to the private sector to increase this supply;
5 - Transitional measures, including limitations on rent rises during the start-up and consolidation period of the program.
All with the aim of introducing a rapid shock to the housing market, which would respond to the emergency, be visible until 2026 - the end of the legislature - and allow the vertiginous rise in the cost of housing to be halted, while it was hoped that the interest rates on mortgage loans, which burden one million two hundred thousand contracts, would stop their asphyxiating rise.
2. The presentation of the Mais Habitação Program ended up polarizing the debate around two central issues - forced renting and local accommodation. The effects were immediate:
1 - It erased other proposals and measures and made it very difficult to reach a desirable agreement on housing, both outside and inside Parliament.
2 - It gave a reason - fair or unfair - for perplexity and a waiting period for some private investment, without which any global solution is insufficient.
3 - It has radicalized positions in Parliament, leaving the absolute majority almost isolated, attacked on the one hand for its proclamatory, unrealistic and perhaps unconstitutional style, as it falls too heavily on private initiative, and on the other for the insufficiency and timidity of state intervention.
As early as March 9, I spoke out about the risks of an excessively optimistic discourse, of high expectations for the timeframe, the means and the administrative machine available and, therefore, of possible unrealism in the projected results.
3. Six months later, this law unfortunately confirms these risks.
1 - Except to a limited extent, and with European funds, the state will not assume direct responsibility for housing construction.
2 - The support given to cooperatives or the use of vacant public buildings, or private buildings purchased or contracted for affordable rental, implies slow bureaucracy and the use of entities overwhelmed with other tasks, such as the Banco de Fomento, or without the means to meet the demands, such as the IHRU.
3 - Forced renting becomes so limited and time-consuming that it appears as a merely symbolic emblem, with a political cost greater than the tangible social benefit.
4 - The same complexity of the local housing regime makes it doubtful that it will be able to achieve the desired effects quickly.
5 - Despite the corrections made to forced renting and local accommodation, this law is unlikely to restore any lost confidence on the part of private investment, and the public and social investment it provides for is contained and slow.
6 - There are no new measures in sight, with immediate effect, to respond to the suffocation of many families in the face of the weight of the increases in interest and, in many situations, in rents.
7 - There is no regime agreement and, without a change of course, there probably won’t be one until 2026.
4. In simple terms, it’s not easy to see where the promised supply of housing will come from effectively and quickly.
It’s an example of how a poor start in responding to a need that time has made dramatic, crucial and very urgent can mark it negatively.
There is no obvious political recovery in the short term, despite the work put into bringing several laws together into one and certain positive ideas, diluted by the bulk of the solutions found.
In other words, all in all, neither forced renting nor local accommodation, nor the involvement of the state, nor its support for cooperatives, nor the concrete means and deadlines for action, nor the total absence of a regime agreement or minimal party consensus, this law is sufficiently credible in terms of its implementation in the short term, and therefore mobilizing for the challenge to be faced by all its essential protagonists - public, private, social and, above all, the Portuguese in general.
I know, and we all know, that the absolute parliamentary majority can repeat the approval just voted in a few weeks’ time.
But, as you will understand, this is not what can or should prevent me from expressing a deep conviction and a serene negative analytical judgment.
In these terms, I am returning Decree 81/XV, which approves measures in the field of housing and makes various legislative changes, without promulgation.
The President of the Republic
Marcelo Rebelo de Sousa
To be continued…
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